Do you know how to help clients decide the best age for starting Social Security benefits, on a pure "time value of money" (net present value) basis? For workers who do not earn more than the earnings limit through the year in which they turn age 66 (currently $14,160), there are two inputs to consider: 1) the average annual Social Security Cost of Living Adjustment (COLA) in the future; and 2) the opportunity cost or discount rate.

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Assuming average COLA is 3.5% and opportunity cost is 5.0%:

  • A worker who delays the start of benefits from age 62 to 66 will receive more cumulative net present value at a "crossover age" of 79.
  • A worker who delays the start of benefits from age 66 to 70 will receive more cumulative net present value at a "crossover age" of 84.

The earnings limit does not apply after the worker's 66th birthday.

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